The Next Big Downtown Change: 5 Proposals for Green Water Treatment Site Revealed
Nestled between Whole Foods, Ladybird Lake, Seaholm, Austin Music Hall, and the 2nd Street District is the City's oldest sewage treatment plant - the Thomas C. Green Water Treatment Plant - which began purifying water from Ladybird lake in 1925. The plant covers 6 acres across 4 city blocks. In addition to using a key tract of land to process water using 1920's technology, the plant also serves to disrupt the natural grid of the city -- it stops second street at its west end and blocks Nueces and Rio Grande from reaching Cesar Chavez.
The Green site offers an incredible development opportunity. With four downtown blocks, it is a huge chunk of land. The location is perfect -- it is on the lake and adjacent to both the hot second street district and the future Seaholm multi-use development. The site is free of Capital View Corridor restrictions, although portions of the site close to the lake are limited to 45 feet in height.
The plant, which is located between Cesar Chavez and Third streets between Seaholm and San Antonio is about to be decommissioned to make way for a new development. This week, the city released basic details on five proposals for redevelopment of the site. Once complete, the new development will likely add retail, housing, and office space while filling in the missing streets on the city grid.
Here are sample renderings from each of the proposals. It's an amazing set, they provide a vision of an important new urban district near the center of downtown Austin:
Larry Speck/PIRATE DESIGN
MITHUN
CATELLUS DEVELOPMENT GRO
BOSSE AND TURNER ARCHITECTS
COTERA AND REED ARCHITECTS
No matter who wins, here are some of the changes that are likely in store for the site when construction begins in 2010 or 2011:
- About 1,000 new apartments and condominiums including many affordably-priced units. While there are many condo and apartment projects currently under construction - and a few that have been cancelled -- demand remains very strong for central, affordable units. All proposals would include more than 100 units priced to be affordable for a family earning approximately $57,000.
- Multiple high-rise towers with downtown retail and restaurant space which will expand the thriving 2nd Street District.
- Lots of office space -- an important part of the downtown mix that has been largely ignored by the current building boom.
- The various proposals include many interesting elements such as a large downtown H-E-B., a movie theater, a major bookstore, a senior assisted-living center, a waterfront park, large hotels
Here is a summary of the individual proposals from the Statesman:
The proposals made by Catellus Development, Forest City, Simmons Vedder Partners, Stratus Properties, Trammell Crow and their respective partners have some things in common. But each also has elements unique to its plan. "Each one of the five has something that is different from the others, that's distinct to that proposal," Council Member Brewster McCracken said. "It's really amazing."
Trammell Crow and partners Constructive Ventures and USAA Real Estate Co. propose the biggest and tallest buildings with the most parking. Their plan also includes the most diverse uses, with space for a 350,000-square-foot hotel and a 250-unit senior assisted living facility in addition to condos, apartments, offices and retail businesses. Five public gathering spaces could accommodate as many as 2,700 people.
Stratus Properties' proposal includes a two-story H-E-B grocery store, with H.E. Butt Grocery Co. serving as a limited partner in the project.
"We think H-E-B being a full-service grocery store is something everybody can afford, it helps every one of those retailers in the area and it makes residential more viable," said the team's attorney, Steve Drenner.
A movie theater and bookstore would also help drive more traffic to the Second Street retail district.
Stratus and partner AMLI Residential are proposing the largest number of rental units, which they say would let them offer housing in a greater range of prices, and they plan to offer medical office space not found downtown. Canyon-Johnson Urban Fund, a partnership of Canyon Capital Realty Advisors and Magic Johnson Enterprises, is also a part of this team.
Simmons Vedder proposes a waterfront art park and four bridges over Shoal Creek, including two for pedestrians only.
This team, which includes Cotera + Reed Architects and Bury + Partners Engineering Solutions, also proposes to essentially turn the buildings into power plants by installing solar panels in the skins of its towers. It plans to use water collected from the condensation of air conditioners to flush the toilets.
Catellus Development has proposed a primarily residential project with 500,000 square feet of office space and nearly 200,000 square feet of retail. But the company is also offering to collaborate with city leaders and the community to develop a final master plan for the property that could differ significantly from its initial proposal.
"We're going to present something we think is really neat, dynamic, progressive and all of that, but with that said, if we are selected we're going to say, 'Let's go out and spend time and hear from the city what they really want and hear from stakeholders what they really want,' " Catellus President Greg Weaver said.
Forest City, which is partnering with Novare Group and Andrews Urban, emphasizes public spaces with a grand plaza at Second and Nueces streets complete with a fountain and transplanted moon tower. A grand staircase inspired by the Spanish Steps in Rome would connect the plaza to the trail along Shoal Creek, which would run from the Austin Energy site north of Third Street to Lady Bird Lake.
Financing in Hand, W Austin Hotel & Condos to Begin Construction on Monday
No project has been subject to more speculation than the W Hotel & Residences. Over the last few months, rumors have swarmed that the project might not materialize. Despite strong pre-sales, it seemed that the large project might not be able to raise the financing required to break ground.
However, the developers have pulled it off. With groundbreaking in site, the Block 21 project will likely become the heart of downtown. Located on 2nd street directly behind City Hall, Block 21 fills an important street-front retail gap between the two AMLI projects. As Seaholm and the redeveloped Green Water Plant grow to become a vibrant corridor between Congress and Lamar just North of Ladybird Lake, the 2nd street district and Block 21 will be in the center of the action.
Once the W Hotel is completed in 2010 and the Condos completed in 2011, the project will also contain the 2,480-capacity venue for "Austin City Limits" as well as other restaurants, bars, and retail.
Owners of W Austin Residences will have full use of all the hotel's facilities as well as access to 24-hour room service, daily housekeeping service and concierge services, and a spa in the building. Whatever, Whenever service provides the closets thing to a personal butler: call them to shop for groceries, take a dog for a walk, fix a flat tire, of pick-up take out on your behalf.
With today's announcement, additional project details were revealed:
- The project will include 165 units, down from the originally planned 196 units. The change is reported to be the result of the combination of some units into larger condos.
- Just more than half, 85 of the 165 units, are under contract with nonrefundable 10% deposits.
- The average price of sold units is an amazingly high $1.1 million with prices ranging from the high $400,000s to more than $3 million.
- The project will have a significant economic impact, creating more than 1,000 jobs during construction and hundreds of new jobs when the project opens. The project is expected to provide the City with approximately $35 million in incremental taxes once it opens.
- It will take 30 months to build the hotel, for an expected fall 2010 completion, and 36 months for the last condominium to be finished, by about May 2011.
Here is a summary from the Statesman:
With financing in place, construction is finally ready to begin Monday on a high-profile downtown development with a 36-story W hotel, condominiums and a new "Austin City Limits" venue.Joint-venture partner Stratus Properties Inc. closed Friday on financing for its Block 21 project, which will cost $295 million, up from an earlier estimate of $260 million.The higher costs are related to 70,000 square feet being added to the original project and a "modest increase" in building costs, Stratus chairman and CEO Beau Armstrong said.The financing paves the way for crews to arrive Monday to start excavation work for three levels of underground parking, Armstrong said. The entire project is expected to be completed in three years. . .But Armstrong said the "sheer magnitude of the project" and a highly challenging lending market altered the timetable. The city had the right to repurchase the property if Stratus didn't start construction by April 15 but gave Stratus an extension, he said."It's a tough time to borrow money now, no matter who you are," Armstrong said. And though, typically, construction loans aren't the hardest part of a deal to land, "because of the turmoil in the credit markets, it became a more difficult proposition," he said.Armstrong said that it also took time to get the necessary building and other permits from the city but that those are now in hand.
With Strong Sales, BartonPlace Construction Begins
BartonPlace, a 270 unit condo project on Barton Springs Road, includes one, two, and three bedroom units starting at $263,000 for 683 feet. With a prime location close to downtown and next to Barton Springs pool and park, the project will is in a great location and well priced. As we have seen with many of the downtown projects, the lower the price, the higher the demand. Projects like 360 with many units under $400K have sold very quickly. With construction underway, the project is expected to be ready for occupancy in late 2009.
Here is a summary from the Austin Business Journal:
A ceremonial groundbreaking was held today for the 270-unit BartonPlace condo project on Barton Springs Road.Constructive Ventures, the Austin-based group behind such developments as The Pedernales, 2124 and Saltillo Lofts, is developing BartonPlace in conjunction with local restaurateur Rick Engel. The project is going up near Engel's Austin Java restaurant on Barton Springs.Construction on the project designed by Dallas-based Boka Powell is expected to take 18 to 22 months.Perry Lorenz, one of the partners of Constructive Ventures, says the company has already collected $45 million in non-refundable earnest money contracts for units in the development."Our robust pre-construction sales show clearly that the condominium market in Austin remains very strong," says Lorenz. "The bottom line is that this is a great location in a solid market, and our team has the proven ability to deliver a unique, high-quality product here. BartonPlace will be a distinctively cool new Austin address."
2008 Downtown Condo Property Assessments: Shockingly Modest Growth
With the new assessment data available online, AustinTowers analyzed Hundreds of downtown condo units in projects such as the Nokonah, Plaza Lofts, and Milago to better understand the current downtown valuation trend. Because units are easy to compare and some sell each year, city assessments for condo units in large projects tend to be relatively accurate.
With the new assessments, we found that values increased by an average of 3% for most of the established projects lie the Nokonah and Plaza Lofts. For newer projects such as the Milago, values increased by a higher rate -- closer to the City average of 13%. In the newer projects, it was the least expensive units -- those that were valued under $300,000 last year - that showed the greatest increase this year with some units increasing in value by as much as 40%. Conversely, some of the most expensive units in the Milago -- which is not a high luxury property -- saw values remain flat or even dip slightly.
None of these trends are unexpected, here is the summary analysis of this year's downtown Austin condo assessments:
- Demand remains strong for affordable units. As construction costs rise, very few affordable condo units are coming on the market. As a result, the value of the least expensive units is rising quickly. Condo units priced under $250K should continue to see appreciation.
- As new high-end projects such as the Austonian, the Four Seasons, the W, and 21c capture the imagination of buyers, prices for the old generation of luxury units have remained relatively flat. Prices for high-end units in non-luxury buildings have declined.
- The broad downtown Austin condo market lagged the City as a whole with small increases of around 3% as supply and demand became more balanced during the year.
- This is the second consecutive year of modest increases in downtown Austin condo values after a sharp rise between 2003 and 2006. During this peak period, for example, values in the Nokanah increased by an average of nearly 70%. Last year, Nokonah values increased by a much smaller 5%.
Surprise Compromise Saves Riverside Condo Project
In a new compromise with community groups, CWS Partners intends to build a scaled-down 8-story project 150 feet from the lake instead of the three 17-story apartment and condo towers with more than 800 units that had previously been proposed. With the support of community groups and a commitment to extend the popular hike and bike trails through the site, the new proposal should fare well as it works it's way through the standard zoning approval process. This is a productive compromise for both sides and a positive sign for the condo market. With the national housing market in such a weakened state, it is a strong endorsement of the market to see developers work so hard to bring a new project to market.
The proposed CWS project is to built on land currently occupied by long-standing apartments built much closer to the lake. Prior to the release of the current rules in the 1980s (they were revised in 1999), buildings could legally be built much much closer to the shore (as close as 25 feet). CWS prior position was that without their requested variance, they would build two 17-story towers within the legal setbacks and simply remodeling the existing apartments into town homes -- a legitimate exception to the setback requirements.
Here is a summary from the Statesman:
In a precedent-setting compromise, developers have agreed to reduce the size of a controversial high-rise residential project on the south shore of Lady Bird Lake and donate land to extend the hike-and-bike trail across the site.In exchange, neighborhood and community groups that had mobilized against the project have made concessions that will allow the project to go forward.The deal reached this week ends a nearly two-year standoff between CWS Capital Partners LLC and the South River City Citizens and Save Town Lake, which had fought to block the project on East Riverside Drive, saying it would violate limits on waterfront development.Austin-based CWS had proposed to build three towers up to 200 feet high and to build within 80 feet of the lake.Under the compromise, the buildings will be no more than 96 feet high, and the project would be set back a minimum of 150 feet from the lakeshore. . . CWS will bring the revised project back before city officials for approvals. With the new agreement, the company will donate 1.5 acres for parkland and extend the hike-and-bike trail, which now stops at the western edge of the site.Miller said it will take four to six months to work through the city approval process and that construction could begin in 2009.
Austin Real Estate: The State of the Market
Still, it's not like it used to be. While the average sale price last month was up 5% over last March, sales were down 21% from the same period last year. Today, nearly 40% of houses put on the market are removed before they sell. Price per square foot has dropped by 4%, and the average discount from listing price for completed transactions has increased from 1.9% to 3.5%. It's worse everywhere else, but Austin is still feeling the pain.
A big question is whether there is a bubble in Austin. The consensus is no, although some price decreases are likely this year. The common wisdom is that the economy is strong, net migration is high, and Austin never experienced the boom that inflated values across the rest of the country. These three reasons are compelling, and they are often recited as the fundamental reasons why Austin is different.
Interestingly enough, Austin may be more exposed to a downturn than many experts recognize. The local economy is dependent on technology. This was made very clear during the dot com bust when migration patterns reversed, jobs were lost, and the housing market stalled. Months ago, Austin and San Francisco were named the strongest economies in the country based on the strength of the technology sector at the time. Since then, much has changed. Today, technology employers are beginning layoffs as the sector weakens. While nobody expects this downturn to be as bad as the last one, a tech downturn will effect the Austin market.
As for the second factor, this remains positive as Austin will continue to grow. Austin's buzz has never been hotter -- the Austin brand will draw people to town under almost any scenario. This migration will be an important buffer over the next couple of years. If this pattern changes, it is time to get worried.
The final "fact" about the Austin market -- that it skipped the boom -- is simply not true. While the broad Austin market experienced only modest growth over the last five years, prices in central Austin have soared. Between early 2005 and late 2007- just a little over two years -- prices for single family homes increased by 41% in Area 4 (Hyde Park), 43% in Area 2 (Allandale & north central Austin), 55% in Bouldin (near Zilker Park), and an incomprehensible 2-year gain of 83% in Area 3 which covers East Austin close to downtown. During this short period the typical central East Austin house increased in value from a median price of $168K to more than $255K. In Bouldin, price per square foot for the median house peaked at more than $300 / square foot in the second half of 2007 -- prices that make downtown condo projects look affordable.
Like any other market, it is difficult to believe that prices can nearly double during a couple of good years and then not retreat when the economy slides, mortgage rates rise, loan underwriting guidelines strengthen, and the national market implodes. While Austin remains stronger than almost any other market, central Austin prices may be at risk over the next year. While new condo prices are unlikely to go down -- they are too linked to costs -- any negative market change will certainly add pressure on developers as they try to complete the sales process for new projects.
Here is a summary from the Statesman:
Central Texas home sales continued to slide in March, falling 21 percent from a year ago, the Austin Board of Realtors reported today.March, which had 1,832 sales of existing homes, was the ninth consecutive month that home sales numbers dropped. And pending sales — sales expected to close in April — show that the slowdown could continue. Those sales fell 54 percent, the highest percentage on record, the report shows, to 1,349.Even with the slowdown, real estate experts assert that the Central Texas housing market is faring much better than most areas around the country. But the national housing crisis has jaded consumer confidence, and Austin has not been immune to the slowdown.The area’s median price of a single-family home for March increased by 5 percent year-over-year to $186,680. However, homes are taking longer to sell, with an average of 73 days on the market, an increase of 14 percent. With homes taking longer to sell, more homes are on the market, up 24 percent to 9,638.
Seaholm Plan Approved: New Downtown Neighborhood to Emerge in 2011
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The 150,000-square-foot decommissioned power plant will be the centerpiece of the 7.8-acre property across Cesar Chavez Street from Lady Bird Lake. With offices, extensive retail, and more than 3 acres of open space, Seaholm will further shift the heart of downtown to the west. While downtown life used to center around 6th street between Congress and red river, the warehouse district, 2nd street district, and Whole Foods have shifted the balance. With Seaholm, the downtown action will increasingly be centered between Congress, Lamar, 5th, and Town Lake.
The most exciting part of the project is the redevelopment of the Seaholm facility itself. When complete, the art deco structure will include nearly 100,000 square feet of retail and restaurants. Construction will 2009, with the final project completed in 2011.
Here is a summary from the Statesman:
The Austin City Council approved the master development agreement for the $117.2 million Seaholm mixed-use redevelopment project today.The agreement says the development group Seaholm Power LLP, led by Southwest Strategies Inc., will pay $98.6 million or 84 percent of the cost of the project, while the city will pay $18.6 million. The redevelopment plan calls for a 22-story hotel, 60 condo units, 130,000 square feet of office space and 50,000 square feet of retail and commercial space. The 150,000-square-foot decommissioned power plant will be the centerpiece of the 7.8-acre property across Cesar Chavez Street from Lady Bird Lake.The city's contribution to the project, which will be raised through property and sales tax revenues, would pay for street and utility improvements, public parks and a parking garage. The city will continue to own the renovated Seaholm Power Plant.
Austin Foreclosures and Loan Delinquencies
In Austin, however, the mortgage crisis is causing much less pain. According to the Wall Street Journal, Austin loan delinquencies are virtually unchanged from the national market peak in the fourth quarter of 2005. During this period, loan delinquencies in Austin have increased by a trivial 0.03 percentage points to 2.97% of loans. This net increase is just 1/60th of the national average increase of 1.84 percentage points. In the worst markets in Florida, California, and Michigan, delinquency rates have risen 5 percentage points or more. In Merced, California, for example, 9.78% of home loans are currently delinquent and home prices have plunged by more than 25%. This is an increase of 7.76 percentage points over the delinquency rate in Q4 of 2005.
During this same period, Austin real estate prices have increased by more than 10%. This compares quite favorably to the average U.S. home which has decreased in value by more than 8%. As a result of the changes, Austin has passed Dallas to become the most expensive housing market in the state of Texas. While Austin home prices are only 90% of the national average, they are moving up the charts quickly as other markets continue to weaken.
There are a few reasons why Austin has fared well:
- Austin skipped the real estate boom which inflated values in the rest of the country
- The Austin economy remains one of the strongest in the country
- Austin continues to attract many migrants from other states, pushing up local real estate prices
- Austin housing remains affordable compared to most major U.S. cities
While Austin has fared well, all is not perfect. The national credit crunch has caused local mortgage rates for jumbo loans to soar and has left many first-time buyers unable to get financing for a new home. The deterioration of the mortgage market has stunted housing demand causing prices to remain flat. While the economy has remain strong, the expected weakening of the technology sector over the next year will have a disproportionate effect on the Austin economy. While Austin fundamentals remain strong -- especially over the long term -- price may dip over the next year.
The good news, however, is that Austin real estate will almost certainly outperform the vast majority of country over the next two years. While growth may be flat, Austin housing remains in high demand.
Patagonia to Lead Congress Avenue Comeback
Today, however, Patagonia -- the upscale outdoor clothing company -- announced that it will open it's first store in Texas in a historic downtown building located between 3rd and 4th street on Congress Avenue. This is a bold move for the company and it is great news for Austin. With the opening of a new destination store, the Patagonia announcement should lead more businesses to follow with a Congress Avenue presence.
Prior to 1960, Congress avenue was the center of retail and commerce for the City of Austin. Over the last 5 decades, Congress Avenue has been in a steady state of decline as city residents increasingly looked to suburbs for shopping and commerce. Today, there are only 13 retail business on the prime central stretch between the Capital and the lake. While a handful of restaurants continue to survive, Congress avenue storefronts are more likely to be vacant or filled with offices than utilized for retail or cultural purposes. With the opening of the Austonoan, the Patagonia Store, the new Arthouse and the redevelopment the historic Yaring's department store on Congress between 5th and 6th into retail and commercial space, there is once again hope that the former glory of our most prominent thoroughfare may be restored.
Here is a summary from the Statesman:
Patagonia, the Ventura, Calif. active clothing and equipment retailer, plans to open its first Texas store at 316 Congress this fall. The 7,000-square-foot store will be the company's 25th location and will carry outdoor sports and lifestyle products tailored to Austin outdoor activities like trail running, bouldering, paddling and hiking/trekking.The store will open in the historic W.B. Smith Building. The company says it chose Austin as the location for its first foray into the Lonestar State because of the city's reputation among the healthiest and greenest communities in the country.
Who is Buying Downtown: 5 Statistics that Summarize Downtown Condo Demographics
1. Only 13% of buyers are buying for investment reasons. While most new buildings are capping the number of investors at 25 percent, the vast majority of buyers are owner-occupants.
2. For the high price range, buyers tend to be young: 27 percent are younger than 30; 35 percent are ages 30 to 44; 26 percent are 45 to 60; and 12 percent are older than 60.
3. Out of town buyers are flocking downtown. While 68% of downtown buyers are from Austin, an amazing 32% are out-of-town buyers.
4. Of the 32% of buyers from out of town, 13% come from other cities in Texas and the remaining 19% come from outside the state. Based on AustinTowers data, the largest number of out-of-town buyers comes from California.
5. A survey of a subset of projects concluded that 70 percent of condo buyers work someplace other than downtown.
Here is the summary from the Statesman:
Most downtown condo dwellers are young people.Many downtown dwellers work downtown.Many people buying downtown condos are investors from outside of Austin.Wrong, wrong and wrong, according to a survey of Austin's downtown condo market to be released today.The Downtown Austin Alliance, an organization of downtown property and business owners, commissioned the study by Charles Heimsath, president of Capitol Market Research, an Austin-based real estate consulting firm.Heimsath said the group sought to dispel some myths about the local condo market.Heimsath will present his findings to the group's Economic Development Committee today. He obtained sales data and buyer-demographic information from six condo projects: the 360 and Spring towers, Bridges on the Park, the Four Seasons Residences under construction, the condos planned for the W Hotel downtown and Sabine on Fifth .Heimsath said he was surprised by the broad age range of buyers: 27 percent are younger than 30; 35 percent are ages 30 to 44; 26 percent are 45 to 60; and 12 percent are older than 60.Heimsath also found that downtown condos are selling well.About 818 condo units will be finished this year, and 90 percent (736 units) are under contract or sold. Tighter credit stemming from the subprime fallout "absolutely" will cause some pending contracts not to close, Heimsath said, "But I don't think that it's going to be a serious problem."Heimsath gave the example of the 44-story tower called 360, where 430 units are spoken for, with a waiting list of 140, its developers say.
21c Condo Project Magically Relocated to Waller Creek
The original 21c project was late to the game, announced just 2 months before the summer meltdown of U.S. credit markets. Although 21c had been actively marketing condo units through a sales office on 6th and Congress, the developers will essentially start from scratch with their condo marketing efforts for the newly planned 295 unit condo tower. At this point, prices have not even been announced.
While the Austin hotel market remains strong, 21c's unlucky timing likely made condo marketing difficult. With the new plans, the developers separate the hotel, residential, and a newly announced commercial tower into three separate projects. This allows them to begin quickly with the economically viable and modestly-scaled hotel project while testing the waters on the other two fronts. When (and if) sales and leasing goals have been met, 21c will be able to embark on the other two towers. One clear sign of the developers preference for hotel rooms over condo and commercial projects is the simultaneous announcement that the existing 21c site on Third and Brazos will also be developed into a new hotel. If all projects are completed on the new site, the project will cost $350 million, a significant jump from the originally planned $200 million hotel-condo tower.
With the move, the new 21c buildings will anchor a high-potential development district on the East end of downtown just north of Lady Bird Lake. The project will be located on a large 3.5 acre site surrounded by park and close to the much-loved downtown hike and bike trails. In the new location, the project will anchor a potential Austin "riverwalk" along Waller creek. 21c is the first major project to take advantage of a city-sponsored $125 million tunnel designed to remove the creek from the floodplain.
Here are some additional details on the new project:
-The new site will be home to the project’s 243-room hotel, 295 residential units, retail, spa, pools, museum, restaurants and other amenities.
- The project, including an underground parking garage, currently totals over 1 million square feet. The development team plans to develop another 425,000 square feet on the site as either a future office/retail or residential/retail tower. The entire project represents a $350 million investment.
- The new location allows the project to be enhanced with park space, a sculpture garden, signature spa, retail, indoor/outdoor meeting space and additional parking.
- The project will include an innovative and accessible restaurant that will emphasize local and sustainable agriculture and feature contemporary American cuisine. Michael Bonadies, CEO of ACE, was previously a founding partner of the New York-based Myriad Restaurant Group, which owns and operates such well-known restaurants as Tribeca Grill, Nobu and Rubicon.
- According to the developers, some of 21c’s most innovative aspects will be its artist lofts and new contemporary art museum, open free to the public 365 days per year. Twelve artist lofts will be made available at favorable rental rates for living and studio space. The museum will provide a new venue for contemporary visual and performing arts.
- The team of architects for the project includes Deborah Berke & Partners, a well-respected New York firm, Goody Clancy Architecture of Boston, and Susman Tisdale Gayle, and Austin firm that is often selected to participate in major downtown projects.
We'll update the 21c profile as soon as full details become available.
2008 State of the Market: Updated Condo Sales Statistics
With the revitalization of downtown, the rapid growth of the city, the strong local economy, and the lack of other downtown housing options, the common wisdom so far has been dead wrong. While some ill-conceived projects will likely never break-ground, those that capture the imagination of Austinites--and that are priced appropriately--will thrive.
Take the 360 project, for example. At 44-stories and 430 individual units, it is one of the most ambitious downtown projects. Today, with the skeleton complete, it is the tallest building in the Austin skyline. Set for completion this year, it is at the point where it needs to have sold 70-80% of units to be viable. Not only is the project now sold out with significant deposits, but there is waiting list with enough buyers for an additional 140 units. While some sales may fall through -- the fact of the matter is that demand has been extraordinary for 360. With great views, a great location, and competitive pricing, 360 shows how strong the downtown Austin condo market is for the right project. With this much demand, 360 buyers should expect to see strong appreciation on their units over the next few years.
A report this week from Residential Strategies provides additional details on the state of the downtown Austin condo market. The report, and other sources, provides the following snapshot of several projects' sales/reservations through the end of first quarter 2008:
* 360: 430 units total; 430 committed. 140 unit waiting list.
* The Shore: 192 units; 189 committed.
* W Austin: 196 units; 140 committed.
* Four Seasons Residences: 166 units total; 60 units committed.
* The Austonian: 188 units; 45 committed.
* SoCo Lofts: 69 units; 41 committed.
* Zilker Place: 74 units; 29 committed.
While different projects have different standards for reservations, the data clearly illustrates a few key market forces. First, near-term projects such as 360 and The Shore are doing great. Second, the most affordable projects are selling well, even if they are outside the downtown core. Finally, the ultra-luxury projects--many of which are still a couple of years out--remain the most at risk. While the Austonian, Four Seasons, and W have broken ground--many of the most expensive units may be the hardest to sell.
All-in-all, the news is good. With clear market data, there is no doubt that thousands of people are willing to live downtown. While some of the projects that have broken ground still have work to do, the projects that do break ground in this environment are likely to be successfully completed. While the local real estate market is far from perfect (though much better than the rest of the country), the state of the downtown Austin condo market remains strong.
Austin Hike & Bike Trail to be Extended
The Hike and Bike trail is a key downtown asset and one of the biggest selling points of downtown living. Extending the trail has been challenging as much of the land is owned and occupied by various commercial and residential projects -- some built as close as 20 feet from the lake.
With today's action, the City council has hired a firm to design a 1.1 mile boardwalk over the water to extend the trail without requiring redevelopment of existing properties. The full project is expected to cost $10 - $15 million to complete.
Development around Lady Bird Lake has stirred significant controversy over the last few decades, staring with the development of the Hyatt many years ago and continuing with a number of recent condo projects proposed for the South side of the lake. In today's meeting the city also took action to review current waterfront development guidelines.
According to the Statesman:
A 15-member task force will soon begin evaluating the city's development regulations for properties along Lady Bird Lake in an effort to eliminate inconsistent and vague rules that have frustrated developers and citizens opposing their projects.Members soon to be appointed will include a representative from the Parks and Recreation Board, the Planning Commission, the Design Commission, the Downtown Commission, the Environmental Board, Save Town Lake, the Town Lake Trails Foundation and the Real Estate Council of Austin.The City Council also will select representatives from registered neighborhood organizations with boundaries abutting Lady Bird Lake and owners of property within the affected areas.The group is scheduled to submit a public report with recommended changes by early fall, and the City Council probably will hold public hearings and vote on the recommended changes in January.
Great News: Austin Home Prices up 0.33%!
While this may not seem like good news at first, it makes Austin one of the strongest real estate markets in the country. During a period when national home prices fell 10.7% and housing in markets such as Miami, Phoenix, and Las Vegas fell by 19.3%, 18.2%, and 19.3% respectively, Austin is practically in a class of its own. Of the top twenty markets, of which Austin is not included, only Charlotte, North Carolina showed a positive return.
While the data is not apple to apples -- the Austin market looks at the average sale over the period and the national statistics look at repeat sales of the same houses -- Austin's positive growth is a sign of strength in difficult times. While most of the country is struggling with unprecedented market declines, record foreclosures, and skittish buyers waiting on the sidelines for the market to bottom out, the Austin market has held steady. In parts of the city -- especially central Austin and Westlake -- values continue to grow at enviable rates.
While Austin isn't immune to the effects of the national market, the city's strong job growth, economy, and migration patterns have provided a buffer against weak credit markets and rising jumbo mortgage rates.
While Austin has remained flat, CNN reports that the national data released today is the worst on record:
"Residential real estate has posted another record decline.The S&P Case/Shiller Home Price index of 20 key markets, released Tuesday, shows that home prices plunged 10.7% in the 12 months ending January. That marks their lowest level since the index launched in 2000.Of those 20 metro areas, 16 reported record annual declines. Ten of those cities posted double digit declines through the 12 months that ended in January.The survey's 10-city index fell 11.4% year-over-year, its steepest decline since its inception in 1987. "
National Condo Market Continues to Implode
The condo markets in Florida, Las Vegas, and other markets are very different from the market in Austin, Texas. After huge run-ups in prices, the trend has reversed, According to the Wall Street Journal, "the median condo sales price in the Cape Coral-Fort Myers area of Florida fell 26% to $202,300 in the fourth quarter of 2007 from $273,400 a year earlier. . . Prices dropped nearly 20% in Tucson, Ariz., and 12% in the Atlanta area during that time, according to National Association of Realtors data. Inside the newly minted Quantum on the Bay in Miami, prices for two-bedroom units have fallen from the high $700,000s to around $500,000."
When prices drop this quickly at the same time as new projects are nearing completion, it creates a very painful market dynamic. When a buyer puts a 10% down payment on a future unit and then sees the value of the unit fall by 20% during construction, they walk away at closing to avoid future losses. The projects, in this situation, wind-up in a very precarious situation with as many as 40% of pre-sold units failing to close. If the developers are unable to pay back the construction loans, they subsequently lose all of their capital, default on the loans, and the projects often go bankrupt.
Will this happen in Austin? The answer seems to be "no." The markets where condo prices have imploded have featured a combination of three critical factors. The first is that all home prices -- condos and single family residences -- have dropped dramatically in value. This has not happened in Austin. In fact, in 2007, prime central areas increased in value. In area 8e which covers much of Westlake, for example, prices increased by nearly 15%. The second factor is that condo projects were massively overbuilt. While many projects are planned in Austin, not all will be constructed. The ones that do make it to the market -- while adding lots of downtown units by historical standards -- represent a miniscule percentage of Austin housing units. In fact, the 700+ downtown units that will be completed in 2008 are essentially sold out at this point.
The third major factor in the national meltdown is the current credit crunch. Today, there are few good options for people with poor credit, first-time home buyers who want to make small down payments, and anybody who needs a jumbo or interest-only loan. These trends effect us here in Austin in the same way they effect the national market. This is the primary reason that the Austin market has slowed down and price appreciation has paused in spite of a strong local economy and string regional job growth.
According to the Wall Street Journal, one of the big problems has been that developers in other cities started too many projects before the bust and failed to cancel or convert projects under construction to another use -- as rental units, for example. In Austin, virtually every project that started constrcution before the summer credit crisis is now sold out. Every project started after the crisis has been required to meet a very stringent bar for pre-sales. While no market is 100% safe -- Austin seems to be in excellent shape in comparison to many other major condo markets.
Hear is a summary from the Wall Street Journal (see the article here - subscription required):
It may seem surprising that anyone would want to add supply to a market whose troubles have been well-publicized for many months. But the economics of condo building encourage developers to bring half-finished projects to completion, even when prices and demand are plunging.Developers usually put up their own money for a project first, then spend borrowed funds. Once developers have spent their money and have commitments from lenders, they have a strong incentive to keep building to finish the project."These developers had millions of dollars tied up and they had them financed so they just moved forward," says J. Ronald Terwilliger, chief executive of Trammell Crow Residential, which builds many rental apartment buildings and also a few condos. "What they hope is that by the time the project is finished the market comes back."However, developers and lenders can more easily shelve projects that are still in the early stages. Many developments nationwide are being canceled, suggesting that by next year or 2010, the number of new condos coming onto the market may slow to a trickle.